Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
News
All NewsCompaniesIndexesCurrency / ForexCommoditiesCryptocurrenciesETFInterest RatesEconomyThemesSectors 

Canadian dollar seen higher if recession fears fade - Reuters poll

08/04/2022 | 05:19am EDT
FILE PHOTO: A Canadian dollar coin, commonly known as the

TORONTO (Reuters) - Analysts expect the Canadian dollar to rally over the coming year, betting the threat of recession will ease as the U.S. Federal Reserve and the Bank of Canada likely wind down rate-hike cycles in 2023, a Reuters poll showed.

The loonie has outperformed most G10 currencies in 2022, but has weakened 1.7% against its broadly stronger U.S. counterpart.

"USD strength comes from both Fed rate hikes as well as fears that those hikes will provoke a recession in 2023," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

"If and as those fears fade in 2023, with the Fed and BoC going on hold, the USD should fade lower and USD-CAD should revert toward its long-run average, and where it should be based on excellent Canadian currency fundamentals."

The median forecast in the poll was for Canada's currency to edge 0.3% higher to 1.28 per U.S. dollar, or 78.13 U.S. cents, in three months' time, matching July's forecast. It was then expected to climb to 1.25 in one year.

The Canadian economy grew at an annualized rate of 4.6% in the second quarter, a preliminary estimate showed last week. That contrasts with a second straight quarterly contraction in the United States and supports further tightening by the Bank of Canada as it tackles multi-decade high inflation.

Money markets expect interest rate hikes by the BoC and the Fed to peak in the first half of next year.

The price of oil, one of Canada's major exports, has pulled back from its March peak but has still climbed 20% this year to above $90 a barrel. The last time oil was trading at such levels, in 2014, the Canadian dollar was around 1.10 per greenback.

Abbey Omodunbi, senior economist at PNC Financial Services Group, expects high energy prices to support Canada's economy and the U.S. dollar to give back some recent gains as inflation likely cools later this year.

Still, there are risks to the loonie's outlook.

"If there's a U.S. recession or global economic recession, there will be an uptick in demand for safe-haven currencies, which will weigh on the CAD," Omodunbi said.

(For other stories from the August Reuters foreign exchange poll:)

(Reporting by Fergal Smith; Polling by Aditi Verma and Susobhan Sarkar; editing by John Stonestreet)

By Fergal Smith


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -0.21% 0.88312 Delayed Quote.-4.01%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.89% 0.64537 Delayed Quote.-10.29%
BAND PROTOCOL (BAND/USD) -1.92% 1.226 End-of-day quote.-76.32%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) -0.19% 1.53999 Delayed Quote.-9.54%
BRITISH POUND / US DOLLAR (GBP/USD) -0.86% 1.12529 Delayed Quote.-15.37%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) -0.43% 105.794 Delayed Quote.16.94%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) -0.12% 0.72146 Delayed Quote.0.30%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.65% 0.73049 Delayed Quote.-6.41%
EURO / CANADIAN DOLLAR (EUR/CAD) 0.15% 1.34886 Delayed Quote.-6.10%
EURO / US DOLLAR (EUR/USD) -0.53% 0.98565 Delayed Quote.-12.82%
FLOKI INU (FLOKI/USD) 0.00%End-of-day quote.0.00%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.64% 0.012172 Delayed Quote.-8.58%
LONDON BRENT OIL -0.46% 93.16 Delayed Quote.17.76%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) -0.72% 0.77924 Delayed Quote.-10.35%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -1.39% 0.56944 Delayed Quote.-16.09%
PNC FINANCIAL SERVICES GROUP, INC. -0.88% 159.23 Delayed Quote.-20.59%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.67% 1.36852 Delayed Quote.6.91%
WTI -0.37% 87.628 Delayed Quote.16.82%
Latest news "Economy"
09:16aIndonesia police say 6 people facing criminal charges over soccer stampede
RE
09:14aUkraine's president asks parliament to approve banker andriy pys…
RE
09:14aBrazil real set for bumpy ride ahead of presidential vote runoff
RE
09:12aGive struggling consumers a helping hand, UK tells high cost credit firms
RE
09:11aEU countries draft plan for 'gas price corridor' - document
RE
09:10aU.S. Jobless Claims Rose 29K to 219K in Oct. 1 Week
DJ
09:08aIndia market regulator orders Brickwork Ratings to shut down
RE
09:08aRare US raid in Syrian govt-held zone kills Islamic State commander -sources
RE
09:07aIndian EV maker Euler Motors expects to ramp up monthly production to 1,000 units
RE
09:06aBritain could face forced power cuts this winter National Grid warns
RE
Latest news "Economy"